2011 Debt Limit Crisis. Austin Trout.docx - Running head DEBT LIMIT CRISIS 1 2011 Debt Limit Crisis Austin Trout FINA-301-03 17 November 2019 Lander

2011 Debt Limit Crisis. Austin Trout.docx - Running head...

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Running head: DEBT LIMIT CRISIS 1 2011 Debt Limit Crisis Austin Trout FINA-301-03 17 November 2019 Lander University
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DEBT LIMIT CRISIS 2 Abstract Congress imposes the debt ceiling on the statutory debt limit. That is the outstanding debt in the U.S. Treasury notes after adjustments. The adjustments include unamortized discounts, old debt, and guaranteed debt. It also includes debt held by the Federal Financing Bank. The statutory debt limit is a little less than the total outstanding U.S. debt recorded by the national debt clock (Amadeo, 2019). This paper delves into the 2011 Debt Limit Crisis that occurred and the actions that government took in order to figure out a solution to raising the debt limit for the United States in 2011.
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DEBT LIMIT CRISIS 3 2011 Debt Limit Crisis The nation’s debt limit is similar to the limit your credit card company places on your spending. But there’s one significant difference. Congress is in charge of both its spending and the debt limit. It already knows how much it will add to the debt when it approves each year’s budget deficit. When it refuses to increase the debt limit, it’s saying it wants to spend but not pay its bills. That is like your credit card company allowing you to spend above its limit and then refusing to pay the stores for your purchases… The debt ceiling only matters when the president and Congress can’t agree on fiscal policy. It has occurred in 1985, 1995 to 1996, 2002, 2003, 2011, and 2013. It is a last resort to get attention by the non-majority in Congress. They might have felt slighted by the budget process and as a result, they create a debt ceiling crisis (Amadeo, 2019). This is exactly what happened in the 2011 Debt Limit Crisis, Congress could not agree with President Obama on raising the debt limit which caused a debt ceiling crisis. Debt Ceiling The debt ceiling is a limit that Congress imposes on how much debt the federal government can carry at any given time. When the ceiling is reached, the U.S. Treasury Department cannot issue any more Treasury bills, bonds, or notes. It can only pay bills as it receives tax revenues. If the revenue is not enough, the Treasury Secretary must choose between paying federal employee salaries, Social Security benefits, or the interest on the national debt (Amadeo, 2019). The main point of raising the debt ceiling is to avoid a government default (which has never happened in history). If the debt ceiling is not raised, the law will require the U.S. to continue payments for entitlement programs such as Social Security and Medicaid, while
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